German Construction Industry: New Residential Construction at Cyclical Peak - Public Construction Gaining Ground

The construction industry remains a key pillar of the German economy. According to the latest construction volume calculations by DIW Berlin, the value of construction in 2014 and 2015 is forecast to grow far more rapidly than the economy as a whole: by a price-adjusted 3.3 percent and 2.1 percent in 2014 and 2015, respectively. Currently, new residential construction is an important engine for growth with the construction volume in this sector estimated to increase by almost 12 percent in 2014, in nominal terms. However, 2014 will also mark significant growth in construction on existing buildings. In addition to gains in residential construction, more positive developments are also currently being observed in commercial and public construction, following declines in these sectors in recent years However, although residential construction is stable, the high growth rates observed in 2014 are unlikely to continue into 2015. Fears that construction price increases would be (too) strong, precisely in this sector, are not supported by the national average. However, the dynamic growth of new construction is expected to tail off appreciably. Moreover, largely as a result of the gloomy economic outlook, the commercial construction sector is also likely to record only moderate growth in construction volume. The highest increases for 2015 are expected in the public construction sector— although the investment program announced by the government is in fact likely to have very little impact, even if further relevant measures are implemented throughout the year.